The country’s major banks are taking full advantage of new technology to drive their operating costs lower, despite fears that the internet ultimately poses a major threat to their business model.

Commonwealth Bank of Australia won plaudits from analysts for keeping a tight rein on costs after it revealed that its operating expenses in the half year ended June 2014 came in at $4.74 billion, which was unchanged from the first half.

Further, the bank revealed that its staff costs fell by 1 per cent to $2.75 billion in the second half, which largely reflected a drop in employee numbers, although this was partly offset by an increase in performance-related incentive payments and the impact of the lower Australian dollar.

As a result of its tight grip on costs, the group’s expense to income ratio fell to 42.9 per cent in the year to June 2014, an improvement of 70 basis points from the previous year.

The improvement in cost control was particularly evident in the bank’s important retail banking division, where a strong increase in home loan lending helped push the operating expense to total banking income ratio down to 36 per cent, a drop of 170 basis points on the prior year.

In its presentation for the full-year results, CBA highlighted the extent to which its retail banking business has migrated online.

The bank said that total branch deposits and withdrawals had almost halved from around 130 million in 2003 to 77 million in 2014. Even the number of transactions at the bank’s ATMs has fallen from 325 million in 2003 to 282 million in 2014.

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In contrast, the volume of eftpos transactions, including credit cards, have almost doubled, rising from 700 million in 2003 to 1,372 million in 2014.

But it is arguably the internet that has seen the biggest transformation, with the value of transactions increasing more than tenfold, rising from $40 million in 2003 to $458 million in 2014.

In the 2014 financial year, eftpos accounted for 62 per cent of all transactions in terms of number, followed by the Internet (21 per cent), ATMs (13 per cent), while the branches only accounted for 4 per cent.

But when measured in terms of value, the internet accounted for 47 per cent of all transactions in the 2014 financial year. In second place were the bank’s 1150 branches, which were responsible for 39 per cent of the value of all transactions, suggesting that many customers prefer to do their major transactions in person. In contrast, eftpos accounted for only 10 per cent of the value of total transactions, while ATMs accounted for 4 per cent.